Reductionism in Economics: Causality and Intentionality in the Microfoundations of Macroeconomics

The Center for the History of Political Economy Working Paper Series No. 2014-03

30 Pages Posted: 21 Feb 2014  

Kevin D. Hoover

Duke University - Departments of Economics and Philosophy

Date Written: February 10, 2014

Abstract

In many sciences – physical, but also biology, neuroscience, and other life sciences – one object of reductionism is to purge intentionality from the fundamental basis of both explanations and the explanatory target. The scientifically relevant level – ontologically and epistemologically – is thought to lie deeper than the level of ordinary human interactions. In the material and living world, the more familiar is the less fundamental. In contrast, the economic world of day-to-day life – the world of market interactions – appears to be the relevant level. Macroeconomics is thought to provide an account that is above, not below or behind, ordinary economic decision-making. An advantage of a macroeconomic account is that it is possible to employ causal analysis of the economy as a whole analogous to the causal analysis of physical systems. The fear of many economists is that such analyses are untethered to ordinary economic decision-making. The object of reductionism in economics – the so-called microfoundations of macroeconomics – is adequately to ground or replace higher level causal analysis with an analysis of the day-to-day interactions of people. The object is not to purge intentionality, but to reclaim it. The paper will attempt to understand the key issues surrounding the microfoundations of macroeconomics from a perspectival realist perspective that elucidates the relationship between economists’ methodological preference for microfoundations and need for macroeconomic analysis – that is, between economists’ respect for the intentional nature of economic life and the need for a causal analysis of the economy. The paper favors metaphysical humility and methodological pragmatism.

Keywords: microfoundations of macroeconomics, reductionism, causation, intentionality, Lucas critique

JEL Classification: B41, B40, E00, E10

Suggested Citation

Hoover, Kevin D., Reductionism in Economics: Causality and Intentionality in the Microfoundations of Macroeconomics (February 10, 2014). The Center for the History of Political Economy Working Paper Series No. 2014-03 . Available at SSRN: https://ssrn.com/abstract=2398476 or http://dx.doi.org/10.2139/ssrn.2398476

Kevin D. Hoover (Contact Author)

Duke University - Departments of Economics and Philosophy ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

Paper statistics

Downloads
191
Rank
128,212
Abstract Views
954